Punters celebrate Shinsei rebirth

THE long-awaited debut of Japan's Shinsei Bank - the country's first foreign-owned lender - seized the limelight today as investors clamoured for a slice of the action.

The shares of the former failed Long-Term Credit Bank (LTCB) were priced at 525 yen, but attracted an avalanche of bids at 822 yen, a 57% premium. They remained untraded as there was insufficient seller interest at that level for transactions to be completed.

Shinsei - which means Rebirth - was sold by the State in 2000 to a consortium led by US investment fund Ripplewood Holdings, the same group that last year snapped up the Japanese fixed-line assets put on the block by Vodafone.

The listing of 35% of Shinsei's equity raised £1.24bn in the Tokyo market's biggest fundraising exercise in five years. It was undoubtedly a coup for Ripplewood. The fund bought LTCB/Shinsei just four years ago for the equivalent of about £529m.

At today's bid price, the revamped bank is worth nine times that figure.

There are two different versions of the Shinsei story - and parts of both of them are true. The one recounted more often has Ripplewood bravely treading where others feared to go and insisting that conventional Western banking practices could be made to work in Japan's relationshipbased, stuttering economy. Outsiders were brought in, risk-assessment processes tightened up, and billions of yen in bad loans were cleaned up. It is estimated that Shinsei's bad-loan ratio is now a respectable 4%.

The gamble excites attention as it is held up as a possible model for a more widespread reform of Japanese companies, especially those in the remainder of its badloanplagued financial sector.

But behind that cosy tale, there lies a more complex, second story centred on the staggering cost of Shinsei's revival from bankruptcy.

Before Ripplewood bought LTCB, the Japanese state had pumped at least four trillion yen (£20bn)into the lender to make it fit for sale. And even after the deal went through, the State offered a continued lifeline, scooping up more bad loans. Opposition politicians have estimated the entire rescue might have cost taxpayers 8.2 trillion yen.

'It's clear a huge amount of money was used,î an opposition Democratic Party spokesman said last month. 'And it's obvious the clean-up method used for these banks had problems because there have been no similar schemes since.' There is a tempting parallel with the forthcoming listing of Chinese State-linked banks.

Although they are not foreignowned, investors and investment bankers suggest that China Construction Bank and Bank of China could raise up to £3bn when they list this year or next. But that will be a fraction of the sum Beijing spends getting them ready for sale.

76.99 points to 10,753.80, a gain of 0.72%. Hong Kong's lead benchmark was little changed after yesterday's heady gains as investors pondered an assault on the 14,000-point level. The lead measure was shaved by 22.38 points to 13,906.

HSBC, the global lender, suffered mild profit-taking after its HK$2.50 jump on Wednesday. It backtracked HK$1 or 0.8% to HK$127.50. Standard Chartered, which reported results largely in line with expectations, was static at HK$137.50.